Choice Of Payment Instruments Research Articles

Commercial paper popularization and enterprise risk taking

This paper constructs accounts receivable commercial paper indicators based on the choice of payment instruments when enterprises sell on credit and selects listed manufacturing enterprises from 2015 to 2022 as data samples for the study. It is found that increasing the proportion of commercial paper payments in credit sales can effectively mitigate the risk-taking of enterprises; the establishment of the Shanghai commercial papers Exchange has effectively standardized the commercial paper market, which further improves the efficiency of financing and effectively enhances the mitigation effect on the risk-taking of enterprises.

Legal Tender: Also on the Legal Tender Nature of Central Bank Digital Currency in China

Legal tender is a manifestation of the national power to regulate monetary value, which pursues to ensure the smooth operation of the undervalue money.The legitimacy of legal tender is originated from the “strictly compulsory use” under the royal monetary prerogative, and it has undergone a transformation from the “acceptance by the nation” to “tender by the private person” under the constitutional law, which shows a growing respect for private choice of payment instruments. Currently, its modern significance lies in guaranteeing the operation of the multi-level monetary payment system dominated by national currency.Legal tender applies to the money issued by the nations or intergovernmental international organizations as a medium of exchange and as unlimited forms. More importantly, the nature of legal tender does not directly forbid the parties to refuse to accept the national currency. In terms of the debts of public law, the national currency has a strict legal tender effect. On the other hand, in terms of the debts of private law, if the parties do not agree on a specific method of payment, the full amount paid by the debtor in the national currency shall be deemed as the proper performance of the contract. Besides, the market operator may unilaterally refuse to accept the national currency under certain circumstances, including conforming to the transaction customs, “reasonable or fair”, and necessary procedures.The legislation of legal tender in China （Renminbi） has the characteristics of “strict compulsory use” and “tender”; In practice, the law enforcement of legal tender has shown the deviation from the legislation as well as differences in policy choices of relevant government departments, which is not conducive to the orderly circulation of Renminbi. Therefore, the legislation of legal tender should be improved from multiple aspects, including continuing to maintain the legal tender nature of Renminbi, imposing a limit on the amount of legal tender of certain currencies, and adding exceptions to allow the exclusion of the validity of legal tender. In addition, we should combine the legal scope of substitute tickets or securities prohibited by law with the legal tender.The double issuing mechanism and the similar legal nature with respect to cash determine that the central bank digital currency to be issued in China should be defined as limited legal tender. The limited legal tender is reflected in the statutory restrictions on the amount of legal tender which can guide users to use the central bank digital currency only in the retail sector, and the payment purposes such as poverty relief and public welfare projects. On the other hand, the law should allow the parties to bilaterally agree or the market operator to unilaterally exclude the legal tender of the central bank digital currency, but the unilateral exclusion should only include not using Renminbi for legitimate reasons and having been fully informed in the situation.

Transaction factors’ influence on the choice of payment by Polish consumers

The choice of payment instrument, which is used every day to make life easier, comprises one of the consumer financial decisions influenced by several factors. To investigate when, where, and for what amount customers use different forms of payment an interview of statistically representative group of 1005 consumers from all over Poland have been realized, in the first quarter of 2019 with the use of the computer assisted personal interviewing method. The data gives a unique combination of information on consumers payment choice and detailed information about demographics, income, and consumer preferences within a nationally representative consumer survey. Within this article statistical analyzes of the influence of transaction factors on consumer choice of payment have been performed together with a first attempt to employ a data-mining method known as Random Forests for predict the choices that those consumers make regarding the method of payment. The results revealed the complexity and diversity of factors influencing consumer choices. The findings show that, despite the development of innovative forms of payment, traditional forms, especially cash, still have a strong position. Notwithstanding among the customers' personal traits, financial knowledge is one of the most important determinants of their payment choices. These results are an important step toward a predictive model of consumer choice. Additionally presented findings on consumers’ payment behavior can guide policy formulation and strategic decision-making of central banks and stakeholders, and thereby contribute toward improving the efficiency of the payment system in Poland as a whole.

Factors Affecting the Consumers’ Choice of Payment Instrument in Poland

“The project is financed within the framework of the program of the Minister of Science and Higher Education under the name Regional Excellence Initiative in the years 2019 - 2022; project number 001/RID/2018/19; the amount of financing PLN 10,684,000.00.”

Ctrl C Ctrl Pay: Do People Mirror Payment Behaviour of Their Peers?

For stakeholders in the payment system seeking to influence the usage of specific payment instruments, it is important to know what drives consumers’ choice of payment instrument. However, little is known about how the social environment influences payment behaviour. This study fills this gap by researching the relevance of peer effects for payment behaviour. We used the detailed payment diary data of Dutch consumers. Our findings show that payment behaviour is strongly influenced by the environment that people live in, especially when the environment is characterised by strong social cohesion. Hence, our study offers new insights into the diffusion of payment behaviour.

How do we choose to pay using evolving retail payment technologies? Evidence from Japan

We examine the determinants of the choice of payment instruments for day-to-day transactions, and whether households that exclusively use cash (only cash users) hold more cash than households that use credit cards exclusively, cash and credit cards, or credit cards and other payment methods (card users) using Japanese household data. We obtain two main results. First, card users generally have higher disposable income, more financial assets, better financial knowledge, younger household heads, female household heads, higher educational attainment, and are not self-employed compared with only cash users. These findings suggest that an improvement in financial knowledge could increase the usage of credit cards in Japan. Second, holding other household characteristics constant, card users for day-to-day transaction values of more than 1000 yen have lower cash holdings than only cash users.

Effects of institutional environment and technology development on payment choice

The purpose of this paper is to analyze the combination of institutional factors and tech­nology advances as determinants for the choice of payment instruments. The theoretical set up suggests that countries that enter into a new institutional environment adopt the attitudes of the accepting group towards the payment choices as a consequence of institutional pressure and tech­nology development. We apply the results of the model to the European Union enlargement process of 2004. Our findings confirm the relevance of both institutional environment and technology de­velopment in retail payment choice decisions particular to Central and Eastern European Countries.

Money and credit as means of payment: A new monetarist approach

We study the choice of payment instruments in a model with money and credit, where sellers must invest in a record-keeping technology to accept credit and buyers have limited commitment. Our model captures the two-sided market interaction between consumers and retailers that can generate multiple equilibria. Limited commitment yields an endogenous debt limit that depends on monetary policy. Money and credit coexist for a range of parameters, and bargaining related hold-up problems can lead to inefficiencies in the adoption of monitoring technologies. Changes in monetary policy generate multiplier effects in the credit market due to complementarities between consumer borrowing and the adoption of credit by merchants.

Precautionary Motives in Short-Term Cash Management: Evidence from German Pos Transactions

This paper empirically investigates whether individuals withhold a certain amount of cash for precautionary reasons at the point-of-sale (POS) in order to be able to cover future transactions that might have to be paid for in cash. Such behaviour is costly for consumers because it imposes additional restrictions on their choice of payment instrument at the POS. Based on the analysis of unique payment diary data compiled by the Bundesbank, we find that the probability of a transaction being settled in cash declines significantly as the amount of cash available at one's disposal decreases. This indicates that consumers do indeed refrain from parting with the entire amount of cash in their wallet. Further results suggest that this constraint could be relieved by facilitating access to cash or by promoting card acceptance.

The economics of bill payments: an empirical analysis

The growing economic literature dedicated to payment instruments mainly focuses on the point of sale payments. Yet, credit transfers and direct debits used in bill payments are much more used in the euro area than cheques, payment cards and other payment instruments. The main objective of this article is, therefore, to verify whether the theoretical standard framework stated for studying the choice of payment instruments at the point of sale is relevant to study bill payments. Using an original data set, we show that the main predictions of the standard model do not hold.

How people pay: Evidence from grocery store data

Empirical evidence based on grocery store transaction data shows that consumer payment behavior at the point of sale is important for understanding models of money demand. There are statistically significant effects of transaction costs, opportunity costs, and product characteristics on the choice of payment instrument, which then, in turn, affect money demand. These results emphasize the overlap between the work of empirical researchers in payment choice and theoretical modelers of monetary economics and should inform both literatures.

The choice at the checkout: Quantifying demand across payment instruments

Dramatic changes have occurred in the U.S. payment system over the past two decades, most notably an explosion in electronic card-based payments. This shift has led to a series of policy debates driven in part by consumers' choice of payment instruments. Using a new nationally representative survey, we transform consumer responses to open-ended questions into product rankings and estimate a characteristics-based rank-order logit model in order to quantify consumer substitution among payment methods. Our estimates are then used to conduct supply-driven and demand-driven counterfactual experiments in order to estimate market share and cost effects. From a counterfactual experiment in which merchants stop accepting credit cards, we predict merchant costs to decline substantially. Because merchants accept credit cards nonetheless, we regard our finding as evidence either that the credit card networks hold market power, or that merchants experience unmeasured intangible benefits from credit card acceptance. We also predict that contactless debit will take market share from cash, checks, and credit, and that the age/cohort effect alone is unlikely to cause debit card use to increase substantially over a 10-year period.

Paper or Plastic? The Effect of Time on Check and Debit Card Use at Grocery Stores

Economists have long recognized that the time costs of using different forms of money can be significant and potentially affect the type of media of exchange used. But although there is theoretical research and anecdotal evidence that suggest time is an important element in determining the use of media of exchange, there is little empirical work documenting the magnitude of this effect. To fill this gap, this paper uses scanner data from grocery store transactions to examine time costs associated with media of exchange. Scanner data is an ideal medium for examining time costs associated with media of exchange, as these data represent actual market exchanges, grocery store retailers spend much time and effort in minimizing the length of time for checkout transactions, and everyone goes grocery shopping - this type of exchange is arguably one of the more frequent that a typical consumer makes. Using check and debit card transactions only to control for the effects of availability of different payment instruments, census tract information to proxy for demographic characteristics, and econometric procedures to control for the endogeneity of the choice of payment instrument and the realized length of time of the transaction, the results indicate that check transactions are, on average, predicted to be approximately 40 seconds longer than debit card transactions. Interestingly, the results suggest that debit card users are, on an absolute basis, more time sensitive than check users, and in particular, these sensitivities vary by the demographics of the local market. Overall, the results in this paper support the theoretical literature on media of exchange and the empirical literature using survey data.

Regulating Interchange Fees in Payment Systems

This paper provides a simple model of ‘four party’ payment systems designed to consider recent moves to regulate interchange fees and other rules of credit card associations. In contrast to recent formal analyses emphasising the role of network effects in the decisions of customer and merchants to use credit cards, we provide a model without such effects. In so doing, we identify the key role played by customers who determine the choice of payment instrument and hence, impose costs and benefits on other parties to a payment system. This model yields new insights regarding the role played by card association rules as well as confirming results derived elsewhere. In particular, we demonstrate that ‘no surcharge’ rules can encourage transaction efficiency by eliminating payment instrument choice as a means of price discrimination. We also demonstrate that, even in the absence of network effects, a desire for balance drives both the socially optimal and privately profit maximising choice of interchange fees. The role of the interchange fee is to ensure that the customer internalises the impact of its decisions on other participants to a payment system rather than from a need to account for network effects alone. Thus, the presence or otherwise of network effects should not be the focus of regulatory attention. Journal of Economic Literature Classification Numbers: G21, L31, L42.